Do you want to understand the power of compound interest and see how your money can grow exponentially over time? Our interactive compound interest calculator provides you with both precise calculations and visual representation of how compound interest works in practice. It’s not without reason that compound interest is called the eighth wonder of the world!
With our advanced calculator, you can both calculate and visualize the effect of compound interest. See how small differences in interest rates and time can produce dramatic differences in the final result:
Compound interest, also called compounded interest, is the concept where you earn interest not only on the original capital, but also on previously earned interest. This creates a snowball effect that makes your wealth grow faster and faster the longer time you save.
Example:
This compound effect causes growth to accelerate over time.
Several elements come into play when calculating the effect of compound interest on your savings. The time horizon is the most powerful factor in compound interest calculations. A difference of just a few years can mean hundreds of thousands in difference.
Example – 10 years vs 20 years: With $10,000 and 7% interest, the result becomes $19,672 after 10 years, but a full $38,750 after 20 years.
Starting to save 5 years earlier can often give more than doubling the savings amount later. The difference between 6% and 8% annual interest may seem small, but over 20-30 years this represents enormous sums. Bank deposits typically give 2-4%, while equity funds have historically given 6-8% annually over long periods. Higher expected returns usually come with increased risk.
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